Richard H. Thaler: "There is no serious economist who defends Trump's trade policy"

LondonNobel laureate in economics Richard H. Thaler (East Orange, New Jersey, 1945) has dedicated his career to demonstrating that human beings don't behave as economics textbooks say we should. We make mistakes, we are driven by emotions, we have biases and irrational expectations. And yet, or perhaps precisely because of this, we remain the protagonists of the decisions that shape the world.

Now, with the expanded reissue of his classic The winner's curse: behavioral economics, anomalies then and now (The Winner's Curse: Anomalies in Behavioral Economics, Yesterday and TodayThaler looks at the world – and the economy – again with the mixture of sardonic wit and lucidity that made him one of the most influential figures in what can be called behavioral economics, which integrates economics and psychology in the study of how cognitive and social limitations affect individual and market decisions. The winner's curse It was first published in English in 1989. Unlike her other great success, Nudge. A little push (Taurus, 2009, signed with Cass R. Sunstein), The curse It has never been published entirely in Catalan nor in Spanish, although some texts on his studies of economic psychology do have a Spanish version.

During a meeting in London with a group of foreign correspondents, this professor emeritus from the University of Chicago reviewed the book's revision process, an experience he has transformed into a broader reflection on the current global economic and political climate. "When I started writing about economic anomalies in the 1980s, everything seemed very simple: economists believed in rational, emotionless agents who maximize profits. But the real world doesn't work that way. People make mistakes, they get emotional, they have problems with self-control. And that's what makes economics interesting," he says.

Thaler explains that the book's starting point is observing behaviors that don't fit the classical paradigm. "To find an economic anomaly, you have to see something that doesn't conform to the theory. It's like seeing an apple going uphill: that sparks interest," he quips. One of these anomalies is what gives the book its title. The curse It was discovered by a group of engineers from the oil company Atlantic Richfield: in auctions for exploration licenses in the Gulf of Mexico, they realized that the winners almost always overpaid. "The winner is the one who made the most optimistic bid, and therefore the most misguided. This happens often, from public tenders to trade wars."

This mechanism, Thaler says, is still at work today, in this era of major geopolitical decisions. "When governments impose tariffs thinking they'll come out ahead, they end up paying too much. No serious economist defends Trump's trade policy: tariffs that change every week can't be good for anyone. They'd need a basic economics course, no textbooks, just a place in the margins."

Unlike many of his colleagues, Thaler isn't looking for a universal model that explains everything. "There will never be one new grand theory. Human nature is too complex to fit into a single framework," he says. That's why, in the new edition of the book—rewritten during the pandemic in collaboration with the young economist Alex O. Imas, also from the University of Chicago—he has chosen to update classic experiments with new data without altering their core principles.

The result is a volume that shows how empirical research has evolved thanks to the big data"Now we can verify on a large scale what we could previously only imagine. For example, we know how consumers reacted when the price of gasoline fell by 50% during the financial crisis. Not only did they spend a little more on gasoline, but some decided give a present in their gasoline cars premiumThey did it, he explains with a smile, as a "way to alleviate the guilt and at the same time celebrate the return to normalcy. An absurd decision from a rational point of view, but profoundly human." For Thaler, irrationality is not a flaw in the human system, but its charm: proof that even in the most trivial decisions, what we seek is to feel a little better, not to be more efficient.

When asked about inequality and proposals for new wealth taxes, Thaler responds with the same pragmatic spirit, perhaps debatable to many. "Imagine we can turn a wheel that transfers money from the rich to the poor. If we turn it too far, no one will have any incentive to work; if we don't touch it, we'll still have billionaires. But politicians can only turn the wheel as far as the system allows. And today, in democracies, the power of the wealthiest is enormous." He adds, always with humor: "In China, Xi Jinping can turn it as much as he wants because he doesn't have elections. In the West, we are limited by democracy—and by an absurd amount of bureaucracy."

In fact, one of his current obsessions is what he and the jurist Cass Sunstein, co-author of said Nudge. A little pushThey call sludgeThe bureaucratic mud that stifles innovation. "California's high-speed rail is a multi-billion-dollar joke. At my house, we had to go through three inspections to install solar panels. The system was already working, but the law prevented us from turning it on. If we want democratic capitalism to work, we must learn to build better, to reduce unnecessary obstacles."

The game of cooperation

Thaler illustrates current global tensions with another of his favorite experiments: the public good gamein which several players can choose to contribute to a common fund or not. "The theory says that no one will contribute, but half the people do, as long as they believe that others will contribute as well. Societies work this way: we cooperate as long as we trust that others will do the same." And when someone doesn't comply, punishment appears. "When we introduce the possibility of sanctioning those who don't cooperate, cooperation increases. People are willing to give up money to punish the freeloaders. It's a lesson for today's world: rules and trust are essential. And so are sanctions. If the United States behaves like a hooligan—one scoundrel“The rest of the world will have to react,” he says. Whether it can or wants to do so, at least while Trump is in power, is another matter.

Although Thaler avoids talking too much about artificial intelligence—"my co-author answers that, I'm no longer promising," he jokes—he acknowledges that liberals were a good fit. "Tech companies change the rules of the game faster than governments can regulate them. But the problem isn't AI, it's how we use it: how we limit the power of those who control it."

At one point in the conversation, Thaler recalls a phrase fromAbundance, The book by Ezra Klein and Derek Thompson, which advocates combating economic and ecological pessimism with investment in innovation, education, and infrastructure, with global cooperation and trust in technology to solve problems like climate change, inequality, and food security: "China is governed by engineers, who know how to build; the United States." He adds a nuance: democracy and capitalism are flawed systems, but they are still better than any alternative. The challenge is to make them work better, build more and better, reduce the mud, and maintain mutual trust. If we achieve this, there is still hope."

At 80 years old and with the same irony that made him famous, Richard Thaler continues to observe the world like that student who resisted believing that people are simply rational maximizers: "Economics, at its core, is the study of what we do with what we have." And what we have is our wonderful, unpredictable, irrational humanity.